Bayleys news & articles

Refurbished CBD landmark building up for sale

Tuesday, 14 July 2015

Tags: Auckland CBDCommercial

A well-known Auckland CBD heritage building, which originally housed the city's first telephone exchange, is up for sale after a major makeover which has attracted a variety of retail and office occupants.

The near century-old, 3095sq m X Gallery building on a 1032sq m site on the corner of Wellesley St and Lorne St, with frontage also onto Khartoum Place, is being offered for sale with 12 tenancies in place producing net annual rental income of just under $1.5 million.

It is among over 80 commercial and industrial properties featured in Bayleys’ mid-year national Total Property portfolio. The fully leased X Gallery is being marketed by Robert Platt and Colin McKenna of Bayleys’ central Auckland office by deadline private treaty closing August 20, unless sold prior.

“The building has been meticulously refurbished into one of Auckland’s finest examples of modernised character space incorporating retail and office accommodation over four levels,” says Platt. “The renovation has included a major structural strengthening and seismic upgrade of the building to 100 per cent of New Building Standard. This has also opened up the option of potentially adding over 10,000 sq m of additional floor area at some stage in the future.”

The building, which has an Historic Places Category B classification, was designed by government architect John Campbell in an Edwardian and Baroque style with the first section completed in 1916 to house a post office and telephone exchange. An extension completed in 1927, required for the rapidly expanding telephone exchange, doubled the building's size.

In 1992, the property was bought by the Auckland Contemporary Art Trust and underwent an award winning internal refurbishment into The New Gallery. It hosted numerous art exhibitions before it was sold in 2012.

The most recent, year-long refurbishment, completed in August 2014, has created two levels of offices with a large, luxurious lobby and 10 retail and food premises. Platt says the current owner worked closely with Heritage New Zealand in the redevelopment of the property and engineering consultancy BGT Stucutures was also contracted to design and monitor the strengthening work.

“The ornate exterior of the building is largely as it was designed originally, apart from the addition of balconies, entrances and glazing,” says Platt. "It's also a striking building inside with a mixture of timber and exposed concrete and brick finishing which has been blended into the superbly presented fit out along with modern building services.”

The reconfigured building now has 1,820 sq m of net lettable office space and 891 sq m of retail and food premises.

In the lower ground level area, accessed off Lorne Street, The Zap Thai Restaurant will open its fourth Auckland restaurant in November occupying 240 sq m of space on a 10-year lease. A Gloria Jeans café, part of a worldwide network of 900 coffee houses in 39 countries, has also taken a 10-year lease over 124 sq m in the ground floor lobby area accessed off Khartoum Place.

Nine smaller retail premises ranging from 31 sq m to 97 sq m are located at street level, six with frontage onto Wellesley Street and three on Lorne Street. They have varying lease terms ranging from four to 10 years, plus rights of renewal, and are occupied by a mix of mostly food tenants and boutique clothing stores.

The food outlets comprise Bruce Lee Sushi, CooCup, a new Asian fusion takeaway concept, Falafel Federation, a new initiative from the owner of the Star Kebabs franchise, and the first New Zealand shop for Gong Cha, a fast growing Asia tea brand with over 600 stores globally.

The two upper floors of just over 900 sq m each have two leases running until late 2019, with six year rights of renewal. Level One is leased to Designworks, one of New Zealand’s longest established design and brand marketing companies which is now part of Australasian media and advertising conglomerate STW Group which leases the top floor on a separate lease. STW Group which comprises over 80 specialist companies which generated A$442 million worth of revenue and a net after- tax profit of A$49.5 million in the 2014 financial year.

Colin McKenna says investigation into the property’s zoning indicates that another 10,320 sq m of buildable area could potentially be added provided a conservation plan, which incorporates and protects the existing heritage building, is prepared and approved by the Auckland Council as part of the resource consent process.

“The award winning expansion of the nearby Art Gallery is an outstanding example of what can be achieved with the redevelopment of an historic building,” McKenna says. “To facilitate the possible future expansion of the X Gallery building, all the leases contain a clause enabling the owner to gain full access to tenants’ premises for reconstruction or structural alterations at any time after 30 June 2019, subject to three months’ notice. In the meantime, the property is producing a substantial cashflow and has good rent review provisions.”